Broad Public Participation in PPIP Will Bolster Legitimacy
Back on Monday, I noted that the briefing fact sheet about the Treasury Department’s Public-Private Investment Plan suggested that a broad swathe of the public might be able to participate in the program, and said that I think it’s a very good idea to try to make sure that this is the case. Ryan Avent surveys some information about how it actually probably wouldn’t be a great idea for individual investors to try to play the PPIP game and concludes “I’m not really sure what their inclusion is supposed to accomplish, other than some feel-good idea that they get to have the fun the bankers have.”
I completely agree with everything Ryan has to say about this except that instead of “some feel-good idea that they get to have the fun the bankers have” I would say “some much-needed political legitimacy for a massive risk being taken with taxpayer cash.” One risk with the PPIP is that it won’t work. But another risk is that it actually will work pretty well, but it’ll look a bit ugly, the public will get outraged about one of the many elements of the plan that aren’t being explained extremely clearly, and the plug will wind up getting pulled. It’s possible, for example, that this plan will wind up more-or-less succeeding in recapitalizing banks, but taxpayers will incur $100 billion in losses while some savvy institutional investors make big profits. I think most informed observers, myself included, would consider that a pretty damn good outcome considering the other possibilities. But it’s also exactly the sort of outcome that could spark an enormous backlash from the public.
Part of avoiding that is for people in a public or somewhat public role to try to explain the situation to our audiences. But part of avoiding that is to try scrupulously to go the extra mile to avoid this turning into a purely inside play. You want it to be the case that the broad public has some ability to participate in any potential windfalls through some kind of reasonably accessible investment vehicle. That’s not a crucial economic imperative, but it is very important for legitimacy and legitimacy is extremely important when you’ve got the government taking unprecedented crisis measures.
25 Responses to “Broad Public Participation in PPIP Will Bolster Legitimacy”
Register
RSSLogin
Topic Cloud
ArchivesBlog RollAbout Matt YglesiasContact Me
Donate
March 25th, 2009 at 2:04 pm
Jake DeSantis, Executive VP of AIG, just told AIG CEO Libby to kiss his ass on the editorial page of the New York Times. He also indicates that he will give his bonus to charity. Maybe you could ask him to invest in this pidgeon drop.
http://www.nytimes.com/2009/03/25/opinion/25desantis.html?pagewanted=1&_r=1&ref=opinion
March 25th, 2009 at 2:09 pm
I meant to say, how about using BSP as the ticker symbol?
March 25th, 2009 at 2:10 pm
They could launch an ETF for it. How about BSP? Atrios fans will get it.
March 25th, 2009 at 2:25 pm
Is Yglesias getting paid for repeat postings of that party hat graphic??
March 25th, 2009 at 2:26 pm
Matt will flack for any Obama policy, even those that stab progressives in the back, because that’s what gets him Access-to the-Important-People, the gold standard of all aspiring D.C. media hacks.
March 25th, 2009 at 2:27 pm
When the captain of the Titanic recklessly slide the side of the ship against the iceberg, he, the most of the crew, and the majority of the hapless passengers went down with the ship. The government holds an inquiry and holds the captain at fault.
This time the captains of Wall St./financiers/insurance recklessly slide the side of the ship America against the iceberg. Instead of going down with the ship the captains are the first ones into the lifeboats. Oh, but first they fleece the crew and passengers of every penny they have. The government claps loudly because it is afraid to offend the good captains.
I realize this analogy is simplistic, but what am I missing here? Why are the captains being rewarded with taxpayer dollars when they caused the problem in the first place?
When do we get a new Teddy Roosevelt and trustbusting?
March 25th, 2009 at 2:29 pm
McMegan also disagreed with Matt on this. But you already knew that.
March 25th, 2009 at 2:43 pm
Poor Matt-the-Hack…
I have a simpler and easier idea. Why doesn’t the Treasury/Fed just put together huge crates full of thousand dollar bills and just deliver them to Goldman and Citi, no questions asked.
Then, any ordinary citizen who wanted to “participate” in that program could just buy stock in Goldman and Citi, thereby sharing in the resulting profits.
It’s a sure win-win for both the banking system and the individual investor…
March 25th, 2009 at 2:48 pm
There are two backlash scenarios-
1) The one you mention, where regardless of the cost (or benefit) to the taxpayer, everyone or just a few gets ‘rich’ and the usual class warfare rhetoric ramps up. But then you do again the AIG bonus thing (but a little more broad based – i.e. higher marginal tax rates). Then, it’s really the ‘rich’ guys’ fault for believing the govt would keep their end of the bargain.
2) The potential one with public participation, in the case where everything goes to s*** (This is what both Avent and McArdle are warning about.) So now the tax payers are on the hook directly for their (sizable) share, and that portion of the public you convinced to put their own personal into this scheme are even more on the hook.
Because you just know that despite fine print warnings to the contrary, more than a few are going to their retirement and college funds into this.
March 25th, 2009 at 2:53 pm
I mean, doesn’t advocacy for public participation in this contradict your broad (but not narrow)* critique of Jim Cramer.
*narrow – he’s a clown and possibly a crook.
broad – ‘playing’ the market is a fool’s errand.
March 25th, 2009 at 2:55 pm
One last caveat-
I’m fine with public participation. But I’m not the one who advocates that people need to be protected from their own stupidity – or bailed out when it goes awry.
March 25th, 2009 at 4:22 pm
I didn’t see where Matt says it is a sensible thing for individuals to do. He says it is a good political ploy.
If lottey tickets were only sold to millionaires, people would be pissed off as soon as one hit it big. Arguing that the lottery should be open to all isn’t saying that it’s smart to buy lottery tickets.
March 25th, 2009 at 5:07 pm
The problem is that if there are big profits to be made in the case where there are taxpayer losses, they’re to be made on the sell side. The banks can profit either way because the banks buying are the banks selling. If the little investor is only in on the buy side they could be in big trouble.
March 25th, 2009 at 5:18 pm
Njorl-
From the last party hat post: http://yglesias.thinkprogress.org/archives/2009/03/inviting_the_public_to_play.php
Again, I agree that the public should be able to be part of this, and in particular with the caveats listed.
But we’ve just had a series of consecutive events where vast swaths of the public did not listen to those caveats. (and other cases where the caveats were not explained properly if it all). Heck, I’m the amoral libertarian – I’m fine with saying if they buy their tickets, let them crash.* But it seems at odds with MattY’s normal political-ethical framework.
*movie reference for the sake of metaphor & hyperbole. Not to be taken literally as my specific views on airline regulation
March 25th, 2009 at 5:40 pm
The public already has skin in the game with future taxes, inflation and a declining dollar. Participation in any of the vehicles will have the same perils as the stock market. If there are some really sweet deals available, do you really think 10,000 working stiffs will get access or will they go to Jamie Dimon et al.?
March 26th, 2009 at 12:14 am
Buy Propecia…
http://www.folkd.com/user/buypropeciaonline Buy Propecia…
March 26th, 2009 at 1:04 pm
Whaddya know. I guess I assumed that he wouldn’t have such a silly opinion.
It is indeed good policy for the public to be allowed to buy in. It is also almost certainly a bad idea for them to do so. Not only are you buying a pig in a poke, the people who you’re bidding against have been in the poke and gotten a brief look at the pig.
Now if there were a “pigs in pokes” index fund, I’d buy that. These assets will tend to be sold for less than their value, but primarily to those who have inside information. This won’t be an efficient market. Those with good information will beat it, those without good information will lose. I just don’t see a lot of the non-trading-industry public as having good information.
March 26th, 2009 at 1:06 pm
Ugh… I posted after the hair-loss/erectile-dysfuntion/penis-enlargement ads.
April 6th, 2009 at 12:03 pm
Nice post! GA is also my biggest earning. However, it
April 8th, 2009 at 3:45 am
Very nice site! cheap cialis http://oixapey.com/aqaxar/4.html
April 8th, 2009 at 3:46 am
Very nice site! cheap viagra
April 8th, 2009 at 3:46 am
Very nice site! [url=http://oixapey.com/aqaxar/2.html]cheap cialis[/url]
April 8th, 2009 at 8:50 pm
I read your blog for quite a long time and must tell you that your articles always prove to be of a high value and quality for readers.
April 9th, 2009 at 8:14 pm
Very nice information. Thanks for this.its great to see someone with a like mind.
April 15th, 2009 at 5:59 am
My friend on Orkut shared this link with me and I’m not dissapointed at all that I came here.